designing marketing strategy using the five competitive forces model

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1 In tern a tio n a l J o u r n a l o f M a n a g e me n t C a s e s DESIGNING MARKETING STRATEGY USING THE FIVE COMPETITIVE FORCES MODEL BY MICHAEL E. PORTER CASE OF SMALL BAKERY IN CROATIA NATASA RENKO UNIVERSITY OF ZAGREB, CROATIA IVONA SUSTIC UNIVERSITY OF SPLIT, CROATIA RUZICA BUTIGAN UNIVERSITY OF ZAGREB, CROATIA Abstract Key words: Small Business. Bakery Industry. Competitive advantage. Marketing strategy. The Development of marketing strategy of the five competitive forces by M. E. Porter. company has to be based primarily on the results of the analysis of industrial structure. The best known framework for analysis and the analysis of Introduction structural features of industries Five competitive forces model by Michael E. Porter, was used in this Nearly all critical parameters of a certain business paper aiming at designing marketing strategies venture, which is, in this case, a small enterprise, and the development of sustainable competitive are in direct correlation to specific marketing advantage for one Croatian small bakery concept. Or, in other words, the secret of successful concerning the influence of five forces on the achievement of organizational goals lies in a whole industry. The interpretation of the findings target reaching efficiency which is supposed to enabled owner of analyzed subject: to determine be greater than the one that competitors show in the attraction of bakery industry, to measure their marketing-related activities. These so-called perceptions of the strength of competitive forces, integrated marketing activities are always targeted to identify the existing competitive advantages and at both defining and satisfying the demands of the key success factors in the further development, to specific market. A small enterprise should create formulate appropriate marketing strategies and to its competitive advantage through its specific predict future movements in the bakery industry. strategic business operations that are significantly Although Porters model is a simplified picture different from the related operations on competitors of the forces that affect the profitability of certain part. Every single entrepreneur should have industries, results of this paper have undoubtedly one goal in mind in order to become successful shown that Porters model is valuable even in the and that is to raise competitiveness. This can small business sector. Taking into account the be achieved through a well-devised marketing contemporary dynamics and unpredictability of the strategy. Therefore the competitiveness of a small turbulent market conditions, the model will surely business entity makes the main research topic of continue to be one of the main tools in strategic this paper. Competitiveness or else defined as a analysis of different industries, but also the specific combination of various factors that results in the business entities, regardless of their size. so-called competitive advantage becomes crucial when it comes to defining excellence, which is the main differentiating factor between business entities. This, in turn, is the key to the creation 376

2 In te r n a ti o n a l J o u r n a l o f M a n a g e me n t C a s es of successful marketing strategy. The research aforementioned possibilities helps define the ways of specific marketing strategies which will help of creating competitive advantage (Porter, 1980). to define sustainable comparative advantage of In the early 1980s, Michael E. Porter developed a small bakery is based on the renowned Porter the most influential industrial structural analysis model of the five competitive forces. model, thus having significantly contributed to the general theory of competitiveness and competitive advantage. Porters model emphasizes the Marketing strategy and competitive dependence of long-term profitability on the five advantage of SMEs competitive forces. These are, as follows: threat of new entrants, bargaining power of buyers, Sudden changes in the business environment are bargaining power of suppliers, threat of substitute the main cause of a large number of management- products and rivalry among existing firms. related problems that occur in all enterprises regardless of their size. The competitiveness of a The mutual influence of the five competitive forces certain enterprise is not only crucial to its success determines both potential for profit and differences within the related sector, but is of the uttermost between industries in relation to the amounts of importance for its survival. Enterprises should profit. Therefore, the purpose of industrial analysis do business in flexible and innovative manner. is to determine the best marketing strategy for the They should also strive for constant improvement specific enterprise. Or, in Porters view (1980), the of their business. Above all they should have competitive strategy of enterprises should define strategy to capture larger share of the market the most lucrative market position for them. in relation to their competitors. (Tipuri!, 1999). Every single strategy is based on creating and Still, there are no unambiguous answers to a large maintaining competitive advantage. In other words, number of questions related to the understanding competitive advantage of a certain enterprise is the of the small business marketing strategy. The cornerstone of its success in the related business existing theoretical frameworks should definitely sphere. Competitive advantage is specific for each be adapted to the specificities of small business enterprise and this specificity is particularly valued industry. These frameworks should also be by consumers. (Renko, 2005). redefined by the so-called qualitative research methods, such as in-depth personal interviews and Competitive advantage of a small enterprise the case study method. The results obtained by is defined as the combination of factors that these research methods will provide an exclusive distinguish a small enterprise from its competitors, insight into the specificities of business operations thus ensuring its unique position on the market. in the small business industry. (Siu & Kirby, 1998.) This particular position is usually superior to the The small business industry-related research has related position of its competitors. (Zimmerer resulted in an interesting finding: the classic form & Scarborough, 2005). The key to business of mass marketing is inapplicable in the sphere of success, from a strategic point of view, is creating small business. This particular finding served as and maintaining competitive advantage, which is the source for the development of new, alternative consequently valued by buyers and inimitable by marketing philosophy, known as the entrepreneurial competitors. It has been indicated by many recent marketing (Chaston & Mangles, 2002; Bjerk & research results that entrepreneurs should create Hultmana, 2002). Still, the alternative marketing at least one competitive advantage in comparison concept should not be interpreted as advice to to their competitors in order to gain competitive entrepreneurs to reject all the aspects of classic edge and make high profit. (Kolakovi!, 2006; marketing theory. In other words, entrepreneurs Burke & Jarratt, 2004; Bennett & Smith, 2002; should consider the so-called flexible approach Krolo Crvelin & "usti!, 2007). philosophy, in which case the characteristics of buyers define the most appropriate marketing Competitive analysis of a single enterprise business strategy. (Chaston & Mangles, 2002). success is based on the analysis of the related business industry. In other words, a marketing strategy development is based on the industrial Research methodology strategy analysis results, which provides insight into the possibilities of business venture success within The Five competitive forces model by Porter was the specific business sphere. The insight into the used in the analysis of the case of small bakery. The 377

3 In tern a tio n a l J o u r n a l o f M a n a g e me n t C a s e s analysis was aimed at defining marketing strategies To identify the existing competitive advantages which would help define and create particular as well as the key factors of business success competitive advantages. The case study method is in terms of further development of the small used in cases that require profound understanding bakery. of the research subject, since its results provide the answers to the following questions: why? To provide an understanding of actual and how? (Yin, 2003). In contrast, the questions strengths and weaknesses of the small bakery what?, who? and when? are usually referred to the and suggest appropriate marketing strategies so-called sample method. The case study method accordingly. is extremely useful in terms of challenging and redefining existing theoretical frameworks and To create strategic framework for positioning offering scope for new hypotheses. (Saunders, of the small bakery in the related industry and Lewis & Thornhill, 2003). The method is aimed at define areas in which the strategic changes will expanding the existing theoretical frameworks. In prove the most lucrative. other words, the ultimate result of the method is analytic, not statistic, generalization. Qualitative research was carried out using the Case of small bakery Hrsti! in-depth interview method (interview with the owner of the analyzed business entity). In order to carry out a thorough analysis of the business Introductory information about the entity, a structured questionnaire was also used in the research. Preparations for the analysis of industry the business entity also included the internal Looking geographically, Croatian bakery industry documentation analysis. Audio scripts that consists of all producers of bakery products contained a large number of questions significant operating on the market of the Republic of Croatia. for the research also proved invaluable for the Considering the fact that import and export of analysis. The interviews in the approximate bakery products is still negligible, it is possible to duration of two hours were carried out during conclude that Croatian bakery industry is made several visits to the bakery. The aforementioned up of domestic producers of bakery products. structured questionnaire was used in the course According to the data of the Croatian Register of of the interviews as the research instrument. business entities, there are 2 large, 8 medium- The questionnaire contained the sequence of sized and 374 small companies that have been statements that were grouped into five categories; actively operating in this sector. It is important to each category represented one competitive force. note that Croatian bakery industry is characterized (Pecotich, Hattie & Low, 1999; Pecotich, Renko & by a large number of small bakery crafts. According Pavi#i!, 2004). Having expressed either agreement to different estimates the number of bakery crafts or disagreement with the statements using a five- that produce different types of bakery products point Likert scale, the entrepreneur assessed varies between 1,500 and even 3,000 and seventy structural determinants of competitive they are not registered in official records of the forces. In this way, the owners perception of the Financial Agency or of the Croatian Chamber of impact that a single force had on his enterprise Commerce. In such circumstances it is difficult to was evaluated. talk about leaders of the Croatian bakery industry, The research was carried out in April and May but, according to the official data of the Croatian 2010 and had the following aims: Chamber of Commerce, ten leading companies with the largest production of bakery products, To analyze attractiveness of small bakeries highest income and largest number of employed sector, using the Five Competitive Forces workers are Zagreba#ke pekarne Klara, Pik, Pan- Model by Michael E. Porter. Pek, Jedinstvo, Tvornica kruha Zadar, Rione, $itoproizvod, Radnik, Prerada and Bobis. Thanks To evaluate the perceptions of Porters five to the fact that the number of market chains that competitive forces in the case of the small prefer to do business with larger bakeries is bakery and define the differences in impact of growing and that state institutions make certain individual forces. efforts to establish stricter control over the market 378

4 In te r n a ti o n a l J o u r n a l o f M a n a g e me n t C a s es of bakery products, unfair competition is gradually services. Hrsti! craft continually invests in modern being prevented. It is estimated that the trend of technological infrastructure and improved staff decreased market share of small bakery crafts structure in order to survive in the competitive and increased market share of industrial bakeries environment. They are currently in the process of in shopping centers will continue. However, when introducing a HACCP system (Hazard Analysis Croatia enters the European Union, the bakery and Critical Control Point). Further expansion of industry will become part of the global European Hrsti! craft is expected with the opening of two market and this will undoubtedly affect the offer new shops and a production plant inside one of and demand of these products. the shops in Solin. In the long-term period the craft is aiming for further expansion of their product According to the data of the State Institute for range to meet the needs of their buyers and for Statistics, production of bakery products has continuous improvement and modernization of shown a slight but steady growth. The production their production plants. increased from 129,674 tons in 2004 to 1,472,012 tons in 2008. Wheat bread accounts for over 50% of produced bakery products, production Threat of new entrants of maize bread is also growing while production of special types of bread is falling. All this can Threat of new entrants to the industry of Hrsti! craft suggest that consumers are not acquainted with has been estimated as moderately high. Although advantages of this type of bread, or, more likely, it large capacity is not a precondition for entering reflects a reduced purchasing power of consumers the bakery industry as pointed out by Hrsti! craft, since special type of bread is more expensive adversities related to volume economy represent than ordinary bread. Production of bread rolls is a significant obstacle to new competitors, mainly increasing as well as of special type of bakery because of high fixed costs of baking companies. products. On one hand this is good for the industry Bakery products are mostly undifferentiated because consumers do not worry about the price and companies of this industry do not have and these products create bigger income, but on systematically developed brands, so it is possible the other hand production of these products is a lot to compete in the industry without investing a lot in more demanding and expensive because of their advertising. However, without major investments in shorter weight. An increase in sales of short weight brand development bakery products will hardly be products is the result of increased availability of differentiated by consumers. The bakery industry of bakery products on the market i.e. there is a large today, regardless of its production capacity, needs number of selling points as well as of the wide modern technical and technological solutions range of these products. and continuous investments in very expensive equipment to ensure high productivity which remains to be an important obstacle to all potential General data about the craft entrants. Besides, the capital is also needed for financing long payment terms as well as for Hrsti! craft production and trade was founded in organizing distribution of relatively small quantities Split in 1992 by Mr Ivan Hrsti!. It started its business of products to the large number of consumers. as a small family bakery and today the craft comprises, in addition to the main production plant, Access to distribution channels has not been two mini bakeries and nine own shops in the area identified as an obstacle to entering the industry of Split and Solin and it employs 55 workers. The mainly because of undifferentiated products as it wide range of bakery products produced by Hrsti! is assumed that traders will sell products of any craft includes basic and special types of bread, roll producer that offers them an acceptable price end bread, cream cakes, birthday cakes, sweets, puff ensures on time delivery. However it is important to pastry cakes, biscuits and other products with an note that more and more bakers organize their own average daily production of 1,450 kg. Particular distribution as it is the case with Hrsti! craft. Among features of their product range are the so-called the advantages of companies that already operate photo cakes, cakes featuring different edible in the industry are undoubtedly experience, good photographs requested by buyers. 20 workers selling locations, easier access to raw material are employed in the direct production, 25 workers and specific technology, things that new entrants work in the sales while others are employed in have to take into consideration. Yet, access to the administration, distribution and maintenance best sources of raw materials does not represent a 379

5 In tern a tio n a l J o u r n a l o f M a n a g e me n t C a s e s major entering obstacle for new competitors since purchasing and stronger competivity in relation strategic baking materials are agricultural products to the market leader. An increasing number of that are not differentiated and are therefore shopping chains are opening their own baking easily accessible. Today, as a result of turbulent production within their selling locations. However, environment and constant market competition, even from the position of buyers they gain influence of different administrative restrictions considerable added value which, with easy access is reduced, although market liberalization led to information and many other benefits offered by to expansion of bakery crafts as centers of grey other participants of the bakery industry, makes economy, particularly characteristic of bakery their bargaining power stronger and they are well industry. Numerous measures are being taken and aware of that. In support to the strong position of they have to be followed by every new entrant to buyers there is the fact that bakery products are the industry. The conclusion based on the results similar and replaceable without differentiating of the conducted interview suggests that there are factors which allows the buyers to change suppliers no significant obstacles for entering the industry in very easily with minimum costs. which Hrsti! craft operates. In other words threat of new entrants is moderately high. The average A particular feature of bakery products is that they rate of perceived rates for this competitive force are consumed on a daily basis. For that reason from the model is 3,25. traders want to make sure that the quality of their offer attracts consumers and that they come to their shops every day. Besides, the intensity of Bargaining power of buyers rivalry among buyers is very strong diminishing their profitability and resulting in the pressure on Bakery producers usually distribute their products suppliers in order to reduce costs. The mentioned through retailers i.e. shopping chains. Moreover, reasons explain why Hrsti! bakery craft distributes bakery products are distributed to public institutions the majority of their products directly to final and tourist companies. In the structure of income consumers through their own shops and only a earned by retail outlets the largest quantity of part is distributed through local retailers. Although products are distributed through hypermarkets and the bargaining power of final consumers is not very supermarkets which is not a desirable situation evident as the one of traders, it is best reflected from the bakery industrys perspective because through the fact that they are very well informed of a very high bargaining power of that segment of and can easily change the supplier. However, buyers. According to Hrsti!s opinion it is important with created close long-term relationships to point out that the bakery industry is fragmented and differentiated product range Hrsti! craft is with regional companies while the market has continually increasing its market share in the area specific local features that every participant has of Split-Dalmatia County. The conclusion based to take into consideration. Furthermore, producers on the results of the conducted interview is that pay to shopping chains various additional taxes the power of Hrsti! craft buyers is moderate. which results in high selling costs. This confirms The average rate of structural guidelines of this the high bargaining power of traders who retain competitive force is 3,24. entire added value while the whole risk related to production and sales is still taken by the producer. Bargaining power of suppliers The trends that all members of the bakery industry must follow as pointed out by Mr Hrsti! refer to the Basic raw materials in the baking industry are fact that smaller shopping chains are becoming flour, baking mixtures, yeast, salt, oil, sugar and more successful than the large ones suggesting improvers, all actually defined as consumer goods. stronger competition among the participants on Thus, they significantly contribute to an increase the retail market. Besides, concentration trends on in price transparency and customer awareness. the retail market are on one hand characterized by Milling and baking industries are strongly connected takeovers while, on the other hand local traders due to flour being the most important input in the expand their operations to other counties becoming latter, and the latter being the most important in that way increasingly important on the national customer of the former. Packaging and packing level. In addition to the ownership concentration, material are increasingly growing in importance their bargaining power is increased because of in the baking industry as much due to the bread interest groups created for the purpose of joint packaging requirements made by chains of stores 380

6 In te r n a ti o n a l J o u r n a l o f M a n a g e me n t C a s es as to the regulations on product entry. The main products that are not generally eaten with bread suppliers of the baking company ,,Hrsti! are: $ito, could be regarded as potential bread substitutes. Moby Dick, "imi! Company, Nikopek, Zvijezda, However, it has been concluded on the basis of the Dabalo and I-pak. The owners of Hrsti! say that conducted interview that the danger of introducing although the basic raw materials for the baking substitute products is rather small. The average industry are not differentiated according to their mark of structural determinants belonging to this characteristics, certain differences in price and force is 1,20. quality of the suppliers products still exist, with regard to the fact that suppliers goods might affect the final quality of the baking products. Rivalry among existing firms Apart from the basic raw materials adequate and The Croatian baking industry is a largely fragmented skilled personnel also comprises an essential input industry, which is reflected through a great number in the baking industry .Competences of workers in of firms existing in this sector and through the bakeries are constantly changing in the course market sharing among its market leaders. Under of an intensive technology development and the those circumstances, in the absence of a prominent transition from a labor intensive industry into a industry leader, its participants accept the price capital intensive one. Labor intensive plants call for dictated by market forces. This, consequently, the employment of master bakers, while the most leads to the minimization of profits, while the recent technical-technological advances enable prevailing market competition among companies the automation of most production processes. with similar market shares results in a high degree However, Hrsti! management thinks that the of industry rivalry. According to Hrsti! managers, baking industry should articulate its demand for the leading producer of bakery products has a the trained and qualified personnel more clearly less than 5% market share, while top ten bakeries and agree on some concrete measures with the cover more than 20% of the market. Athough education system. the consumption of bakery products in Croatia is relatively high, its growth is limited. This naturally, Lack of baking companies investments and intensifies the industry rivalry as participants in expensive technology along with long collection this industry can realize their development only periods and overall market illiquidity create demand at the expense of their competitors. Companies for additional financial means, whose suppliers are are usually not aware of their interdependence so financial institutions. Actual global politics leads that they may initiate a price war with unfortunate to growing prices of capital and restrictive credit economic consequences for the whole industry. policies of banks, which has a negative impact on It is precisely the price competition among the profitability of the baking industry. Nevertheless, bakery products producers that has been more Hrsti! managers claim that the company manages strongly manifested than other forms of non-price to finance itself mostly by its own financial means competition, so the management of Hrsti!. The and does not encounter any major difficulty in case baking industry is characterized by a large share of of funding itself from external financial sources. fixed production costs and an impossibility of long- The data obtained through a conducted interview term product storage so that baking companies led to a conclusion that the bargaining power of often find themselves in enviable positions of suppliers within the industry of the craft Hrsti! is balancing only the variable costs in the course of of middle intensity. The average mark of structural an intensive struggle for an increase in production determinants belonging to this competitive force This is due to capacity surplus being generated by shown in the model is 3,00. the production specificity and seasonal oscillations, although the striking problem of overcapacity has not been noticed in the bakery Hrsti!. Threat of substitute products Products of the baking industry are very similar Baking products fall into the category of staple and without any distinguishing factors, which foods. Therefore, according to Hrsti! managers, additionally increases the competition intensity as appropriate substitutes for bread as the most a customer decides on buying certain products on essential baking product are difficult to find. the basis of their vicinity and price. Bakeries rarely Perhaps products such as breakfast cereals, carry out systematic researches on customer oatmeal porridge, crackers, rice, pasta and similar and final consumer preferences and do not 381

7 In tern a tio n a l J o u r n a l o f M a n a g e me n t C a s e s invest either a lot of energy or money into brand into the Croatian market. A high degree of rivalry making. Nevertheless, through the continuous intensity in the industry of the craft Hrsti! has development of its bread and sweets range and also been confirmed through the recapitulation the professional training of its personnel Hrsti! is of perceived marks given to the competitive force striving to become recognized at the local market, shown in the model. The average mark of structural where its main competitors are Svagu!a, Bimita, determinants of the measured force is 3,78. Babi!, Keko and Bi%ki!. Possible merging with their competitors, according to Hrsti! management, would be desirable, but in their point of view those Identification of key success factors associations could not survive at the local market. referring to the craft Hrsti! Moreover, there is a bakers association in Split, whose main task is balancing the price of bakery After a thorough analysis of all the forces affecting products. However, its members do not often follow the industry in which the bakery craft Hrsti! does the defined guidelines. business, it may be concluded that there is a high degree of rivalry within the sector, but that there Output obstacles of the bakery industry, which also exists a noticeable threat of new companies boost the intensity of rivalry, are greater at entering the market. The bargaining power of industrial bakers than bakery crafts. Big bakeries customers, owing to the minimal costs of change, employ a large number of workers and therefore is more strongly manifested than the bargaining need substantial financial means for redundancy power of suppliers, who, although assessed as payments of those who have become superfluous. being moderately strong, can by all means affect In addition, large bakeries are oriented towards the quality of the final industry product. The threat key account customers and when negotiating a of substitutes is not striking in this case, as shown contract on cooperation they agree to produce a in the figure 1. certain amount of products. If they fail to observe the provisions of the contract, they will pay A greater difference between the strong and the penalties. Technical-technological advancement weak forces can be noticed at the industry of the allows bakers to switch over to capital intensive craft Hrsti!, which is regarded as good potential as production, and on the other hand highly it directs the owners strategic initiatives towards specialized equipment can rarely be used for any defense against negative forces, A wide range of other purposes, which makes leaving the industry bakery products along with the development of a even more difficult. When discussing technological recognizable brand, the opening of its own specialist possibilities, special emphasis should be placed stores at key locations and cost efficiency are key on the production of frozen and half-baked bread success factors of the bakery Hrsti!, according to that is much longer lasting and that is baked on its owners. This will bring about a decline in the the spot. This technology is increasingly being intensity of price competition and an increase in used by chains of stores, thus presenting a major the profitability of the bakery craft in the long run. danger of the infiltration of foreign bakery products 382

8 In te r n a ti o n a l J o u r n a l o f M a n a g e me n t C a s es Figure 1. Comparison of the perceived strength of competitive forces Source: Research Findings (treatment: June, 2010.) On the basis of conducted strategic analysis, may be inefficient and Crafts Hrsti! may moderate specific initiatives for the defense of the negative this using partnership with micro-bakeries. This competitive forces affecting the business trades way, by such delegation of certain product lines Hrsti! can be identified. Further efforts to open their that are not of strategic importance, the craft will own stores in key locations will provide additional use its capacity more efficiently. Finally, continued cash flow by direct contact with a consumer, investment in modern technology is necessary which enables more effective communication and and strengthening of productivity with a fast implementation of various marketing activities. turnover of assets and boosted profitability would Partnerships established in this way increase make crafts Hrsti! more profitable. Of course, for consumer loyalty and reduce their aspiration for investing in technology, special attention should a change of supplier. Although the creation of be paid to the proper capacity dosage in order brand is a difficult and long process, craft Hrsti! to avoid overcapacity, and take a more favorable undoubtedly can provide greater profitability and position within the bakery industry in Split-Dalmatia reduced bargaining power of customers, but also County. reinforce the barrier to potential newcomers. In a situation where buyers and consumers can change suppliers easily, it is necessary to be constantly Conclusions present in the market, follow trends and look for ways to hinder the transfer of the customer, and Though, the companys business is affected look for ways to differentiate their products by by a number of factors that may or may not be consumers. As communication channels Crafts under its influence, above-average profitability, Hrsti! should use their own retail facilities that are as an economic measure of success is the in daily direct contact with consumers. result of superior design and implementation of marketing strategies. Strategy, as a basis of Hrsti! can make their own retail network expansion search for competitive advantage, must have by acquisition of uncompetitive subjects within an entrepreneurial dimension, which arises the industry, particularly those in key locations. In from its understanding as a means by which an another variant, it is possible to offer a business enterprise, not only adapts but also initiates and through franchising to small bakeries. Production of directs changes in the environment. Connecting small quantities of certain products from its portfolio companies with the most important segment of 383

9 In tern a tio n a l J o u r n a l o f M a n a g e me n t C a s e s its environment - the industry is the essence of forces do not monitor only the changes in the its strategic behavior and the key to success environment, but causes of these changes are of the company is the sustainable competitive included in the review. Therefore it is important to advantage. To have a competitive advantage understand the relationship between competing means to achieve a more favorable position than forces and causes of structural changes in a its industry rivals, but also other market participants particular industry. However, although the model by better positioning. Thus, an enterprise should is a simplified picture of the forces that affect not be isolated from their surroundings, especially the profitability of some industries, the analysis from the industry to which it belongs. Therefore, carried out in a small bakery Hrsti! proved as an development of appropriate marketing strategies applicative tool. To this day, the model has not of enterprises must be based on the results of the experienced any changes and its value grows analysis of industrial structure. even more because of that. Taking into account the contemporary dynamics and unpredictability, In this sense, for the analysis of specific business the turbulent market conditions and the growing cases the best known framework for analysis of importance of information technology model will the structural characteristics of the industry is undoubtedly continue to be one of the main tools used - Porters five competitive forces model with in strategic analysis of different industries. the basic aim of designing marketing strategies and the development of sustainable competitive advantage for a small bakery. Each of the forces References from the model is determined by a number of structural characteristics, and their combined Bennett, R. & Smith, C. (2002). Competitive strength determines profit potential of industries. conditions, competitive advantage and location of The analysis aims to identify the primary sources SMEs. Journal of Small Business and Enterprise of competitive advantage and key success factors Development. Vol. 9. No. 1. pp 73-86. of the market who, acting in a market environment of the analyzed economic entity determine its Burke, I. & Jarratt, D. (2004). The influence of ability to survive and develop. The aim of the information and advice on competitive strategy bakery owners is clear: find a position within the definition in small and medium sized enterprises. industry where his company can defend against Qualitive Market Research: An International the competitive forces the best way, or where it Journal. Vol. 7. No. 2. pp 126-138. can influence them in its favor. Chaston, I. & Mangles, T. (2002). Small Business Finally, the interpretation of the findings of the Marketing Management. New York: Palgrave. study allowed the owner of a bakery Hrsti! Kolakovi!, M. (2006). Poduzetni%tvo u ekonomiji : determine the attractiveness of the baking znanja. Zagreb: Sinergija. industry, measure the perception of the intensity of competitive forces as well as determine the Krolo Crvelin, A. & "usti!, I. (2007). Creating difference between the perceived strength of Competitive Strategies of Croatian SMEs. ICSB individual forces, identify existing competitive World Conference. At the Crossroads of East and advantages and key success factors in the further West: New Opportunities for Entrepreneurship and development, understand the real strengths and Small Business. 13th to 15th June 2007. Turku. weaknesses and design appropriate marketing Finland. strategies, build a framework for positioning within the respective industries, discover areas where Pecotich, A., Hattie, J. & Low, L.P. (1999). strategic changes have the greatest effectiveness Development of Industruct: A Scale for the and predict future movements in the corresponding Measurement of Perceptions of Industry Structure. industry and accordingly shape strategic initiatives Marketing Letters. 10(4). pp 409-422. to ward off negative forces. Pecotich, A., Renko, N. & Pavi#i!, J. (2004). During the study certain limitations of Porter Reinterpretation of Industruct and M.E. Porters model are taken into account. Specifically, the Five Forces Model: Empirical Evidence From model describes the current state of the market, Croatian Busiess Practice. 2nd International but as market situation changes, influence of Conference Enterprise Odyssey: Building certain forces changes as well. Finally, competitive 384

10 In te r n a ti o n a l J o u r n a l o f M a n a g e me n t C a s es Competitive Advantage. Ekonomski fakultet Zagreb. 17th to 19th June 2004. pp 1823-1833. Porter, M. (1980). Techniques for Analyzing Industries and Competitors. New York: The Free Press. Renko, N. (2005). Strategije marketinga. Zagreb: Naklada Ljevak. Saunders, M., Lewis, P. & Thornhill, A. (2003). Research Methods for Business Students. Harlow: FT/Prentice Hall. Siu, W. & Kirby, A. (1998). Approaches to small firm marketing A critique. European Journal of Marketing. Vol. 32. No. &. pp 40-60. Tipuri!, D. et al(1999). Konkurentska sposobnost poduze!a. Zagreb: Sinergija. Yin, R. (2003). Case Study research Design and methods, London: SAGE Publications. Zimmerer, T. & Scarborough, N. (2005). Essentials of Entrepreneurship and Small Business Management, New Jersey: Pearson Education. Case of bakery Hrsti! was prepared by using the following additional sources: Internal documentation of craft Hrsti!, in-depth interview with Mr. Ivan Hrsti! and Miss Ivana Hrsti!, craft owners and with Mrs. Ingrid Abram, head of accounting. Interviews were conducted during April and May 2010; Biznet, http://www1.biznet. hr/HgkWeb/do/ advsearch/results (accessed, May 2010.); Data from Central Bureau of Statistics, /2010/14- 01-01_01_ 2010.htm (accessed, May 2010.); Bakery messenger portal for millers, bakers and pastry, option =com_content &view=category&layout =blog&id=67&Itemid =82 (accessed, May 2010.) 385

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